JANUARY 2008: TIMBER INDUSTRY
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At what
cost?
This is a new challenge, one that’s
pitting forestland against new economic forces, says Matt
Donegan, co-president of Forest Capital Partners, a timberland
investment group based in Portland and Boston. “Hoping is
not a strategy and I don’t think we can hope anything is
going to go away. We’re going to have to have to start
evolving if we want to preserve our working forests.”
 Jim Geisinger, executive vice president of Associated Oregon Loggers, predicts big cutbacks in production this year for Oregon mills thanks to the ongoing drop in homebuilding. PHOTO BY JON MEYERS |
Dale Riddle is senior vice president of legal affairs at
Eugene-based Seneca Jones Timber, which manages about 166,000
acres of forestland in western Oregon. He argues the two
biggest challenges are the trade relationship with Canada,
which subsidizes its timber industry, and the restrictive U.S.
federal timber policy.
In the 1980s timber from federal lands made up 50% to almost
60% of Oregon’s annual harvest. Since then the federal
government has cut back logging following legal battles over
endangered species habitat and management practices; timber
from federal lands now makes up less than 10% of the
state’s annual harvest. That puts most of the
state’s timber production on private lands and creates a
fire risk on overgrown federal lands.
Other pressures on the industry are more indirect: Over the
past five years, Plum Creek Timber Company, Longview Fibre,
Rayonier, and Potlatch, all of which own land either in Oregon
or the Pacific Northwest, have transitioned from traditional
corporations to real estate investment trusts — a special
tax status for companies whose focus is income-producing real
estate assets. (Weyerhaeuser is the only major company to not
make the switch.) These companies aren’t necessarily
abandoning the timber business. Analysts say timber performs
well even when the stock market does not.
But when the land is worth more than the timber, REITS sell.
After becoming a REIT in 2006, Potlatch killed plans to build
an $8.1 million poplar mill in Boardman. It announced it would
sell 300,000 acres of its timberland in Idaho — where
it’s the largest private landholder — and three
other states over the next decade.
Plum Creek, the nation’s largest private landholder, has
run up against controversy for its use of its timberland. In
Washington, Maine and Montana, Plum Creek has sold land to
developers or is actively developing resorts and housing
developments on 100,000-plus acre parcels of its own
timberland. Most famously, the company — which did not
respond to requests for an interview for this story —
also filed, and then withdrew, Oregon’s largest Measure
37 claim. The claim would have given Plum Creek the ability to
develop 32,000 acres of the 372,000 acres of forestland it owns
in the state.
That kind of land sales or development by REITs could have an
impact on the state’s smaller, privately held timber
companies, especially if those big companies are harvesting
timber or selling land based on stockholder demands rather than
on a long-term plans. As Geisinger points out, “When
you’ve got an accountant managing forests, that’s
not always the best forestry.”
Cascade Timber Consulting, which is based in Sweet Home,
manages 145,000 acres of forest in Linn County. Its president,
Dave Furtwangler, points to another potential long-term
concern: If real estate trusts push for short-term returns on
their land, it could drive up the cost of all timberland and
price out smaller owners.
The biggest impact of real estate-based management practices
could be in how they push people and working timberland into
tighter and tighter spaces, says Bob Ragon, executive director
of Douglas Timber Operators in Roseburg. “If they
subdivide for ranches and build lodges out here, that brings in
a whole different question: How do we manage our lands when we
have houses sitting right next door?”
ACROSS THE COUNTRY, there are a lot of new houses sitting on
what used to be working timberland. In the past 15 years, more
than 30 million acres of private working forest in the U.S.
changed hands. Oregon — where 35% of forestland is
privately owned — is following that same trend toward
fragmentation where large timberland sales are followed by
smaller and smaller sales, according to the Department of
Forestry,
 If big timber companies push for real estate-based returns on their land, Cascade Timber Consulting president Dave Furtwangler thinks it could drive up the cost of all timberland and price out smaller owners. PHOTO BY JON MEYERS |
The value of that land is multifold: jobs, rural economies,
supporting industries, habitat, biodiversity, water, carbon
sequestration (the natural process of trees removing and
storing carbon dioxide, which plays a major role in global
warming, from the atmosphere). But to save that land, the
timber industry can’t be the only advocate, Donegan
says.
“It’s got to be the conservation community who
identifies the value of working forests,” he says.
“Conservationists need to stand up as a third party and
say, ‘This is a crisis.’”
Some of them are. Bob Stacey, president of arguably the
state’s most influential conservation group, 1,000
Friends of Oregon, has a clear stance on working forests:
“We’re going to continue to need forest products.
And we’re going to continue to have some of the best land
in the world for growing high-quality timber.”
Stacey says something needs to happen to make sure responsible
forest management is economically viable. One solution he and
others are looking at is conservation easements. An easement is
the selling of specific rights, such as development or grazing,
to a conservation organization. The landowner keeps ownership
of the property but gives up whatever right was sold. While
common in California, Idaho and other states, they’re
rare in Oregon because of their redundancy with some of the
state’s land-use laws.
They could be useful here for one major reason. Timber
companies would get compensated for not splitting up their land
into small parcels and selling them, which they’re
allowed to do under current laws.
Unsurprisingly, buying development rights isn’t cheap.
The Trust for Public Lands spent $9.5 million for conservation
easements on 55,000 acres owned by Potlatch in Idaho. Donegan
and Stacey point to a few federal and state programs that offer
funding for easements. Additionally, easements wouldn’t
need to be — nor could they realistically be —
purchased for all timberland, only the most valuable and prone
to sale. One example of that is an easement the Trust for
Public Lands bought for 1,500 acres of timberland near Salem
this last October.
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UNTIL THE PAST FEW decades, the intersection of logging and
residential growth has had little impact on the timber
industry. Conservation efforts from outside the industry played
a minor role as well. The biggest force that shaped the
industry was federal forests.
As demand for timber spiked during World War II, the U.S.
Forest Service agency began its commercial timber sales
program. In 1945, Oregon produced 6,050 million board feet of
timber, 720 million of which came from federal land. Ten years
later the state’s overall total had jumped to 9,720
million board feet thanks in large part to a 145% increase in
the amount of timber from federal forests. That was the heyday
that would set financial and employment expectations for years
to come.
Then came the spotted owl, federal lawsuits from environmental
activists concerned with management policies, and new
regulations. In 1994, four years after the owl was listed as an
endangered species, the Forest Service cut timber production on
federal lands in Oregon by 50%. The state’s total
production, which Oregon State University researchers had
already identified as being on a downward trend, dropped 20%
from the year before. The number of logging jobs alone
plummeted 30% over the course of that decade.
It’s no surprise that any effort to bolster the timber
industry begins with an attempt to reopen federal lands. And
the efforts — from tiny towns to Washington, D.C. —
to do so could fill a book. Success has been slow.
Since 2000, timber harvests on federal lands in Oregon have
climbed from 330 million feet a year to about 600 million last
year. Part of that growth is an attempt by the Bush
Administration to meet the requirements of the Northwest Forest
Plan — the 1994 plan that restricts logging in spotted
owl habitat but sets aside a dedicated source of harvestable
wood. Last year the federal Bureau of Land Management began
working on a plan that would further increase logging on land
protected by the plan. If implemented it would likely face
opposition from at least some environmental groups.
A team from conservation, industry, academic and state groups
laid out a possible federal forest restoration plan at this
year’s summit on the Oregon Business Plan, where Smith
and Wyden also pushed for more harvesting, respectively
focusing on larger harvesting amounts and thinning efforts. But
their goals were the same: improving the economic and
environmental impact on the industry and the state.
A CHANGING WOOD-PRODUCTS market, a growing population with
bigger personal incomes, a new demand for real estate in rural
areas: Add it up and you get a changing value for forestland.
The future of timber is not necessarily in timber.
“The environmental community has been beating up on us
for years. They thought we had no options and were committed to
growing [trees] no matter how costly. But what we know and what
they’re discovering is that we do have options,”
Miller says.
The benefits of working timberland cited by the industry and
conservation groups are clear: carbon sequestration, water
quality, habitat, controlled sprawl, jobs. Combined, the
forestry and wood products industries are one of the largest
employers in Oregon, providing about 61,000 jobs — 12,000
specifically in forestry and logging — and a $2.5 billion
payroll in 2005.
The industry, by its own admission, has failed at educating
Oregonians that working timberland is good for more than just
the companies that own them. And convincing the public to place
a monetary value on something unseen, like the potential for
development, will be difficult. Just ask a few of the backers
of Measure 37: Seneca Jones Timber, Cascade Timber Consulting,
Stimson Lumber. This new attempt could be even harder.
But advocates for working forestland have a strong argument:
The effects of a fire or a clear-cut are transitory compared to
the permanence of development.
“We need to make people understand that it’s in
their interest to keep land in forest production,” says
Ray Wilkinson, legislative director for Oregon Forest
Industries Council.
“They might not like what the timber industry does all
the time, but they’ll like the alternative a lot
less.”
Have an opinion? E-mail feedback@oregonbusiness.com
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